EMPLOYEES' RETIREMENT SYSTEM The Maryland-National Capital Park and Planning Commission

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1 EMPLOYEES' RETIREMENT SYSTEM The Maryland-National Capital Park and Planning Commission 1 REGULAR BOARD OF TRUSTEES MEETING MINUTES Tuesday, April 4, 2017; 9:30 A.M. ERS/Merit Board Conference Room The regular meeting of the Board of Trustees convened in the ERS/Merit Board Conference Room on Tuesday, April 4, 2017 at 9:30 a.m. Voting members present were: Howard Brown, Alicia Hart, Elizabeth M. Hewlett, Amy Millar, Sheila Morgan-Johnson, Barbara Walsh and Joseph C. Zimmerman, CPA. Patricia Barney, CPA, arrived at 10:00 a.m. Khalid Afzal, Pamela F. Gogol, and Marye Wells-Harley were absent. ERS staff present were: Andrea L. Rose, Administrator; Heather D. Brown, Senior Administrative Specialist; and, Sheila S. Joynes, Accounting Manager. Presentations by Meketa Investment Group - Peter S. Woolley, CFA, CLU, ChFC - Managing Principal/Co-Chief Executive Officer; and, Mary Mustard, CFA Principal; and, Wilshire Associates, Bradley A. Baker, Vice President; Mark E. Brubaker, CFA, Managing Director; Marc Friedberg, CFA, Managing Director; and, Ashley Bazzani, Associate. Also present was M-NCPPC Legal Department William Dickerson, Principal Counsel and Tracy Harvin, Senior Counsel. 1. CONSENT AGENDA The following items are to be approved or accepted by vote on one motion unless a Board member requests separate consideration: A. Approval of the April 4, 2017 Board of Trustees Meeting Agenda B. Minutes of Regular Meeting, March 7, 2017 C. Minutes of Closed Session, March 7, 2017 D. Disbursements Granted Report February 2017 MS. WALSH made a motion, seconded by MS. HART to approve the Consent Agenda. The motion PASSED unanimously (7-0). (Motion #17-23) 2. CHAIRMAN S ITEMS A. Board of Trustees Conference Summary CHAIRMAN HEWLETT encouraged trustees to consider attending an educational session noted on the Conference Summary. These conferences have been attended by trustees in prior years and received a good review. 3. MISCELLANEOUS 4. COMMITTEE REPORTS/RECOMMENDATIONS A. Investment Monitoring Group Committee Presentation by Committee Chairman, Patricia Colihan Barney, CPA i. Regular Report of March 21, 2017 a. Recommendation to Approve the Revised Statement of Investment Policy

2 2 Andrea Rose presented the Investment Monitoring Group s (IMG) Regular Report of March 21, 2017 in MS. BARNEY S absence. The IMG met with VOYA Investment Management s ( VOYA ) Mark Haak, Senior Vice President, Senior Portfolio Manager and Team Leader, and Russell Greig, Vice President, Institutional Client Advisor, regarding VOYA s Senior Loan Trust ( Trust ) and reviewed Wilshire Associates Manager Review of the strategy which reflects a slight outperformance since inception and a ranking in the 68th percentile versus Wilshire s Universe results as of December 31, VOYA has $217 billion in assets under management as of December 31, 2016, with $22 billion in senior loans. The IMG reviewed Wilshires Associates Manager Review for the J.P. Morgan 130/30 Strategy as of March 21, 2017 which reflects a slight outperformance since inception and a ranking in the 16 th percentile versus Wilshire s Large Cap Core universe. Wilshire s Brad Baker recommended revisions to the Statement of Investment Policy as follows: Add an 8% allocation to low volatility equities; reduce the U.S. and international equities allocations from 23% to 19%; annually update and move the assumption chart on page 2 to an appendix; and add infrastructure to page 6 under public real assets. The IMG concurred with these recommendations. MS. HART made a motion, seconded by MS. WALSH to approve the revised Statement of Investment Policy. The motion PASSED unanimously (7-0). (Motion #17-24) Items 3 and 4 on the IMG Agenda were tabled to the April 18, 2017 meeting. B. Administration & Personnel Oversight Committee Presentation by Committee Chairman, Barbara Walsh i. Regular Report of March 21, 2017 MS. WALSH presented the Administration & Personnel Oversight Committee s ( Personnel Committee ) regular report of March 21, The ERS issued a joint Request for Proposal (RFP) with the Maryland-National Capital Park and Planning Commission for Actuarial Consulting Services on January 24, Four (4) firms submitted responses and the Personnel Committee reviewed their proposals. Each firm was required to meet minimum requirements and submit certain documents as part of the process. The Personnel Committee evaluated each firm on criteria, including, but not limited to: a) qualifications and relevant experience of offeror; b) key personnel assigned to the project; c) methodology and approach; and d) proposed fees. All the firms were well qualified; therefore, the Personnel Committee focused its evaluation primarily, but not exclusively, on the organization, the consultants assigned to the ERS, and the proposed fees. The Personnel Committee unanimously agreed to award Boomershine Consulting Group ( BCG ) the contract, contingent upon a further review of additional questions and clarifications related to BCG s RFP response. The Personnel Committee will evaluate BCG s response at its April 18, 2017 meeting and return a final recommendation to the Board at its May 2, 2017 meeting. BCG proposed an experienced team and a competitive fee proposal. Additionally, BCG s history and working relationship with the ERS staff and Board were key considerations. The Personnel Committee reviewed the Statement of Plan Net Position, Statement of Changes in Net Position and Budget v. Actual for Quarter Ending December 31, 2016 and had no questions or concerns.

3 3 5. REPORT OF THE ADMINISTRATOR Presentation by Administrator, Andrea L. Rose A. Administrator s Report dated March 24, 2017 Andrea Rose presented the Administrator s Report dated March 24, Ms. Rose said the ERS onsite programs are gaining popularity. Presentations and individual consulting sessions have been conducted or scheduled at the following locations: MRO 3 sessions; CAB 2 sessions; Northern Area Maintenance; Watkins Park Nature Center; and Central Area Maintenance. Northern Trust s transition management group is working with the ERS Staff and Wilshire Associates to implement the Blackrock Global Low Volatility Index at an 8% target allocation and simultaneously decreasing the U.S. and non-u.s. equity allocations from 23% to 19% as authorized by the Board at its January 3, 2017 Special Meeting. The Montgomery County Commissioner, Prince George s County Public Member, Montgomery County Public Member, and the Bi County Open Trustee seats expire June 30, The Montgomery County Commissioner seat is appointed by the Commission and in accordance with the ERS election procedures Notices were placed on the ERS and the Commission s websites, on the Commission s Intranet site, in the Update Newsletter and was forwarded to the Washington Area Investment Forum for distribution. Two (2) applications were received for the Prince George s County Public Member Seat and four (4) applications for the Montgomery County Public Member Seat. The Personnel Committee will review the applications at its April 18, 2017 meeting and make a recommendation to the Board in May. The Board makes a recommendation to the Commission for the final appointment. The ERS received one eligible application for the Bi-County Open Trustees Seat from Barbara Walsh who is determined to have won by acclamation. Additionally, the ERS Board of Trustees Chairman and Vice Chairman terms expire June 30, The semi-finalists for Investment Consulting Services, Meketa Investment Group and Wilshire Associates, provided Responses to Questions from the Investment Monitoring Group and an updated Request for Proposal Questionnaire with data through December 31, The firm s were asked to prepare a 45-minute presentation covering the firm s Investment Consulting Philosophy, Consulting Specialties & Strengths, Proposed Team, including background and strengths, Private Equity and Real Assets Capabilities and Proposed Changes to the ERS Current Investment Structure & Manager Roster. An additional 45 minutes for each semi-finalist was allocated for Questions & Answers. MS. BARNEY arrived at 10:00 a.m. 6. INVESTMENT CONSULTANT FINALIST A. Meketa Investment Group Presentations by Peter S. Woolley, CFA, CLU, ChFC - Managing Principal/ Co-Chief Executive Officer; and, Mary Mustard, CFA Principal i. Presentation Slides ii. Response to Additional Questions iii. Questionnaire Updated as of December 31, 2016

4 4 Mr. Peter Woolley, Managing Principal/Co-Chief Executive Officer and Ms. Mary Mustard, Principal, presented Meketa Investment Group s ( Meketa ) organizational structure, client services and commitment to research. Mr. Woolley has 28 years industry experience and has been with Meketa for 21 years. Ms. Mustard has 8 years industry experience and has been with Meketa since Meketa was established in 1978 and is a full-service investment consulting and advisory firm. Meketa has 150 clients, with over 250 funds, who have aggregate assets of over $900 billion which includes $388 billion from 41 public fund clients. Meketa derives no revenue from investment managers, commissions, or outside vendors. Meketa is 100% independently owned by twenty-eight senior professionals of the firm. Meketa s investment philosophy takes a long-term approach to investing, to diversify very broadly to protect against a wide variety of risks, avoid unnecessary risks, invest in primarily generative assets, focus active management on less efficient asset classes and passive management on more efficient asset classes, use bestin-class managers and minimize fees and other expenses. Meketa reviewed the ERS asset allocation and portfolio structure and made several recommendations. MS. MORGAN-JOHNSON noted Meketa s fee of $197,500 and asked if the fee was negotiable. Mr. Wooley indicated it was not negotiable. B. Wilshire Associates Presentations by Bradley A. Baker, Vice President; Mark E. Brubaker, CFA, Managing Director; Marc Friedberg, CFA, Managing Director; and, Ashley Bazzani, Associate i. Presentation Slides ii. Response to Additional Questions iii. Questionnaire Updated as of December 31, 2016 Brad Baker noted the current relationship between Wilshire and the ERS. Wilshire was originally hired as the Investment Consultant to the ERS in Bradley Baker, Vice President, has worked on the ERS Consulting Team since 2005 and served as the ERS lead consultant since Mark Brubaker, Managing Director, who was the original lead consultant from 2001 May 2004 will be the back-up consultant. Ashley Bazzani, Associate, provides investment reports, research and performance measurement statistics. Wilshire was founded in 1972 and is 100% employee owned. The investment consulting business began in Today, Wilshire Consulting has over $993 billion in assets under advisement; 116 clients serviced by 24 consultants with an average of 22 years of industry experience and 14 years at Wilshire; and, a 5:1 client to consultant ratio. MS. HART left the meeting at 12:43 p.m. The team reviewed the relationship milestones and accomplishments and discussed the ERS allocation history. The ERS has experienced strong absolute and relative investment returns by asset class and at the total portfolio level. The total portfolio returned 9.86% for the 1 year ending 12/31/2016 which was top decile performance. Wilshire Investment Consulting s philosophy involves effectively managing risks and costs which are credited to achieving long-term investment objectives. Mark Friedberg, Managing Director of Wilshire Private Markets, also was the lead consultant for the ERS from May 2004 until 2010 when he moved over to Wilshire s Private Markets Group. Mr. Friedberg reviewed Wilshire s private markets capabilities focusing on philosophy, access and performance.

5 5 MS. MORGAN-JOHNSON noted Wilshire s proposed fee of $195,000 and asked if the fee was negotiable. Wilshire agreed to discount the fee to $193,000. C. Approval of Investment Consultant The Board discussed the two firms at length. Trustees felt both were strong competitors and brought a lot to the table. The ERS has had a great relationship with Wilshire since The lead and back-up consultant has always been very responsive. Trustees had concerns with Meketa s lead consultant s work load and time constraints and questioned if the ERS would get the lead consultant s full attention as it is used to from Wilshire Associates. MS. MORGAN-JOHNSON made a motion, seconded by MS. BARNEY to select Wilshire Associates as the Board s Investment Consultant for a three-year contract with the option of two more additional years at the negotiated fee of $193,000. The motion PASSED unanimously (7-0). (Motion #17-25) The Board of Trustees meeting of April 4, 2017 adjourned at 1:35 p.m. Respectfully, Heather D. Brown Senior Administrative Specialist Andrea L. Rose Administrator